Musgrave agrees €57m deal to sell UK division

The Musgrave Group has reached agreement to sell its loss-making UK operations for €57m, despite managing to slash the division’s losses by 67% last year.

This time last year, the Cork-based grocery and foodservice group, which owns the SuperValu and Centra chains, announced the commencement of a restructuring programme for its British operations after losses there, and integration costs regarding the takeover of Superquinn, dragged underlying profits of €60m down to a total group loss of €95m for 2013.

The group is set to publish its 2014 accounts next month, but yesterday said that losses in the past year at its UK operations, which cover the Budgens and Londis brands, fell from £21m to £7m. It also announced that agreement has been reached to sell the UK operations to leading British cash and carry/wholesale group, Booker for £40m (€57m).

Speaking yesterday, Musgrave CEO, Chis Martin called the move a “difficult” choice, but “the right decision”, adding that the removal of such a loss-making element of the business can only return the group to growth mode and increase the capacity to bring further value to customers and stakeholders.

He added that the decision supports Musgrave’s growh ambitions. Its business will now focus on the island of Ireland and its recovering Dialprix brand in Spain.

While Musgrave has made progress on lowering its losses and costs in the UK —70 head office jobs were cut and 300 Londis branches were removed from the portfolio — the UK grocery retail market remains very challenging. With just a 0.5% share of that market, Mr Martin said that it was “clear” the turnaround was going to struggle.

Musgrave entered the British market 13 years ago and has, over the course of that time, invested around €200m in its operations there.

“The grocery market in Britain is experiencing fundamental and permanent structural change, with intense competition and a deflationary environment,” he said, adding that given the tough market conditions, all possible options for the UK operations had been evaluated.

The deal is subject to competition approval in the UK, with a timeframe for conclusion currently unknown.

Meanwhile, the overall deal will also include a strategic partnership between Musgrave and Booker in Ireland. Mr Martin said it should offer both businesses growth opportunities, enhance Musgrave’s digital/online selling capabilities, improve its supply base and even create more opportunities for Irish own-brand owners looking to export.